Why the Ogden or Discount rate is relevant and pressing for all businesses?

The Ogden rate is part of the calculation that determines the level of an award in a serious injury case.

In this article I don’t intend to go into too much detail on the technical change itself but those wishing to read more of that level of detail can just let me know and I can signpost you to  articles that might assist your insomnia.

Suffice to say though, the result is that insurers are having to massively increase their payment reserves for existing losses on their books. It is estimated that the immediate insurance industry financial hit is in the order of £7bn.

Businesses shouldn’t be fooled into thinking this is a problem just for the insurance industry.

With insurers estimating an ongoing annual industry cost of £1.2bn, premium levels just have to increase.

We are already seeing significant motor and liability premiums increases being sought by insurers and whilst some insurance companies have been quicker off the mark than others, all insurers are affected so rate increases will filter through to all businesses eventually.

This knock on effect to premium rates is reasonably easy to understand but there is perhaps a more pressing potential problem facing businesses and that is the adequacy of the liability limits of indemnity they currently buy.

Most businesses enjoy an Employers Liability Limit of Indemnity of £10m. We have seen an example of an employers liability claims reserve increase from £5m to £10m due to the change in the discount rate. This is a claim for s single injury; consider the possibility of multiple injuries.

With these levels of payments anticipated there is a need to seriously consider purchasing additional layers of indemnity cover.

In terms of your public and products liability limits of indemnity, many businesses still carry less than a limit of £5m. In this post Ogden world, there is a serious need to consider looking at layers of cover significantly in excess of £5m.

Excess layers of liability limits are not expensive but the cost of being underinsured could be catastrophic to your business.

For a confidential conversation around this subject please contact one of our team or the writer directly.


Paul Gardner Dip Mgnt (Open), Dip CII, FFB

Sales and Marketing Director


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